TD Bank 2006 Annual Report Download - page 47

TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis 43
As at As at
(millions of Canadian dollars) October 31, 2006 October 31, 2005
Securities $124,458 $108,096
Securities purchased under reverse repurchase agreements 30,961 26,375
Loans (net of allowance for credit losses) 160,608 152,243
Deposits 260,907 246,981
GROUP FINANCIAL CONDITION
Balance Sheet Review
Total assets were $393 billion as at October 31, 2006, $28 billion
or 8% higher than October 31, 2005. At October 31, 2006, total
assets primarily comprised loans (net of allowance for credit
losses) of $161 billion, or 41% of total assets, trading assets
of $77 billion, or 20% of total assets, investment securities of
$47 billion, or 12% of total assets, and securities purchased
under reverse repurchase agreements of $31 billion, or 8%
of total assets. Total average interest-earning assets were $315
billion, compared with $288 billion in 2005. Total liabilities
increased $24 billion, comprising a $14 billion, or 6%, increase in
deposits and a $8 billion, or 8%, increase in other liabilities, and
an increase in subordinated notes and debentures of $2 billion, or
34%. In addition, at October 31, 2006, total shareholders’ equity
increased $4 billion to $20 billion, up 24% from the prior year.
FACTORS AFFECTING ASSETS AND LIABILITIES
The Hudson acquisition by TD Banknorth in January 2006, added
total assets and liabilities of $12 billion each to the Bank’s
Consolidated Balance Sheet.
As a result of the sale of TD Waterhouse U.S.A. to Ameritrade,
the Bank’s total assets and total liabilities decreased by $5 billion
and $7 billion, respectively. Subsequent to the sale, the Bank
continued to manage certain deposits related to TD Ameritrade
clients and retained these deposits on its Consolidated Balance
Sheet. These deposits grew over the year as the Bank built
stronger relationships with TD Ameritrade clients. As a result, the
deposits managed by the Bank increased by $2 billion, compared
with October 31, 2005. The deposits managed by the Bank on
behalf of TD Ameritrade’s clients are used to fund part of the
assets on the Bank’s Consolidated Balance Sheet. This led to an
increase in assets of $2 billion, compared with October 31, 2005.
The Bank also enters into structured transactions on behalf of
clients and the assets are recorded on the Bank’s Consolidated
Balance Sheet for which market risk is transferred to third parties
through total return swaps. As at October 31, 2006, assets
under such arrangements amounted to $16 billion, compared
with $14 billion in 2005. The Bank also acquires market risk on
certain assets through total return swaps without acquiring the
cash instruments directly. Assets under such arrangements
amounted to $5 billion as at October 31, 2006, unchanged
from 2005. Market risk for all such positions is tracked and
monitored, and regulatory market risk capital is required.
The assets sold under these arrangements (excluding equity
derivatives), discussed in the “Off-balance Sheet Arrangements”
section are included in this amount. See Note 19 for more
details on derivative contracts.
Securities and securities purchased under reverse
repurchase agreements increased by $16 billion, or 15%,
and $5 billion, or 17%, respectively over 2005. The increase was
attributable to portfolio growth of $6 billion in government and
government-insured securities, $7 billion in equity securities and
$4 billion in other debt securities.
Loans (net of allowance for credit losses) at October 31, 2006
were$161 billion, up $8 billion, or 5%, from the prior year.
Hudson contributed $6 billion of the growth. The increase
represents significant growth in credit card and business and
government loan portfolios, of $2 billion and $6 billion, respec-
tively.The increase in credit card loans is a result of an increase in
the number of active VISA accounts. The acquisition of Hudson
contributed $4 billion of the increase in business and govern-
ment loans. Consumer installment and other personal loans
increased $343 million due to growth in indirect lending and
sales of overdraft protection attributable to the launch of the
Bank’s new “Pay-As-You-Go” product. Residential mortgages,
including securitizations, increased by $2 billion, or 1%, from
2005. The growth in residential mortgages is attributable to a
strong real estate market. Bank-originated securitized assets
not included on the balance sheet amounted to $28 billion,
compared with $24 billion last year.
Other assets were up $1 billion or 2% year-over-year. This was
due mainly to our investment in TD Ameritrade and goodwill
recognized from the Hudson acquisition, partially offset by a
lower trading derivatives revaluation balance.
Deposits were $261 billion, up $14 billion, or 6%, from the prior
year. The increase in total deposits was driven by a $15 billion
increase in personal deposits and an increase in bank deposits of
$3 billion, partially offset by a decrease in business and government
deposits of $4 billion. The increase in personal deposits is com-
posed of an increase in personal non-term deposits of $7 billion
and an increase in personal term deposits of $8 billion. The growth
in deposits primarily reflects the effects of organic growth and the
acquisition of Hudson, partially offset by the impact of foreign
currency translation. Hudson contributed $8 billion of deposits at
the time of acquisition.
Other liabilities increased by $8 billion or 8%. The growth was
attributable to a $7 billion increase in obligations related to securi-
ties sold under repurchase agreements, a $3 billion increase in
obligations related to securities sold short, offset by a decrease in
other liabilities of $1 billion. Hudson contributed $4 billion of
other liabilities at the time of acquisition.
Subordinated notes and debentures were up by $2 billion,
compared with 2005, due to the issuance of various subordinat-
ed notes and debentures.
Non-controlling interests in subsidiaries consist entirely of
the minority interest in TD Banknorth.
Shareholders’equity rose by $4 billion, or 24%, from the prior
year, primarily due to growth in retained earnings of $3 billion,
and acommon share issuance during the year related to the
dividend reinvestment plan, stock options exercises and the VFC
acquisition, partially offset by the foreign currency translation
adjustments.
SELECTED CONSOLIDATED BALANCE SHEET ITEMS
TABLE 21